(1) Subject to paragraphs (2), (3) and (4), a payment service provider which is liable under regulation 76(1) may require that the payer is liable up to a maximum of £35 for any losses incurred in respect of unauthorised payment transactions arising from the use of a lost or stolen payment instrument, or from the misappropriation of a payment instrument.
(2) Paragraph (1) does not apply if -
(a) the loss, theft or misappropriation of the payment instrument was not detectable by the payer prior to the payment, except where the payer acted fraudulently; or
(b) the loss was caused by acts or omissions of an employee, agent or branch of a payment service provider or of an entity which carried out activities on behalf of the payment service provider.
(3) The payer is liable for all losses incurred in respect of an unauthorised payment transaction where the payer -
(a) has acted fraudulently; or
(b) has with intent or gross negligence failed to comply with regulation 72 (obligations of the
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